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View Diary: Why deficits don't matter - the reality of government finance (116 comments)

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  •  Hmmm. I think not. (1+ / 0-)

    Although you state

    you may accept them along with "most established economists". . .
    you've missed that I do not accept them, and it seems few "established economists" do, either.

    In my response I say

    I'm nonetheless supportive of your introduction of this economic zeitgeist to DK, and I intend to continue struggling with it.
     In telling me
    It would be better for you, it you want to contribute to the advancement of national economic policy, to analyze the strengths and weaknesses of MMT as you see them.
    you seem to miss that I am already doing that.  Indeed, I spoke of "Previous efforts I've made to make sense of this. . ." so I deny that I am questioning (or rejecting) MMT without consideration.

    What I am calling Zwackus on is his offering these views of the economy as essential definative truths, when they are not.  I love a good paradigm-impugning theory, and thrust them into arguments with some regularity.  But I usually try to identify them as such.  That is what I want Zwackus to do.

    •  I did not overlook that you "do not" (2+ / 0-)
      Recommended by:
      psyched, jellyyork

      accept them. Because you like to correct others so much I thought that this early "error" would, when you detected it, make you happy.

      You missed, actually you deliberately neglected, to respond to the point about Krugman. He is at war with most of the "established economists" in America; there are only a handful who support him. So you cannot have it both ways. You cannot claim both Krugman and established economists as authorities because Krugman has lambasted them repeatedly as being fools. So, take your choice.

      I take Krugman as more of an authority than "established economists." But his irritability is a problem for him. He has made claims about the leaders of MMT that are demonstrably false and when pressed on it he refuses to respond--probably because he has no response. In addition comments he has made in the past year, often as asides, indicate that he is rethinking the importance of deficits. It would be like him to try to claim the ideas of MMT as his own if he could. He is after all a very ambitious man.

      Furthermore, you need to read Krugman's economics textbook which he indirectly promotes in his writings. You will find that he is confusing and confused, a hallmark of someone who is still laboring with his ideas. This is not surprising because modern economics is a mess, and MMT is the sensible way to go. So, rather than fine tune modern economic thought, MMT will replace it altogether.

      Argument from authority, which you seem to love dearly, has been historically a failure.

      Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

      by hestal on Sat Nov 10, 2012 at 04:45:12 AM PST

      [ Parent ]

      •  I'm a shrink, not an economist. (0+ / 0-)

        I am a latecomer to politics, and have been even more neglectful of economics most of my life.  I had a client once who lent me MMT-based books, and I tried to make sense of them, but really couldn't see their mechanisms and dynamics operating in "the real world."

        Perhaps you could suggest 2 books: one that explains MMT to an intelligent layperson, and another by Krugman that can help me see his confusion (which I've never recognized)?

        •  It is a very good thing to be "not an (2+ / 0-)
          Recommended by:
          arendt, psyched

          economist." Congratulations.

          I am a mathematician, well actually more of an arithmetician, and as a lifelong hobby, I have tried to understand economics. I was frustrated. I could not make sense of it. Because I have been able to understand almost everything else of institutional importance in our nation I could not understand why I could not understand economics. Either I was stupid (a real possibility) or economics did not work. I was encouraged, however because I learned to trust my instincts over the years, and once I assumed that economists were wrong in many important ways the world made sense again.

          My problem with economics is that it is of little use. There is no agreed upon way to apply it to the lives of the People. Therefore, to me, it was and is a waste of time. MMT, on the other hand, makes sense if considered in isolation, removed from the current economic structure. If MMT had been tried first, modern economics would have never been developed.

          But MMT suffers from lack of a coherent narrative. It suffers from a lack of nuts and bolts illustrations. It suffers from lack of a rounded picture of the national economy should it be implemented. You and I and others like Zwackus and letsgetitdone could be helpful in developing such a picture. There is a story to tell here. What is MMT, what will it do for the People if it is implemented, and how do we get from here to there are necessary chapters in that story. We know where we stand—current economic theory is a gross failure, all over the earth, and throughout the known universe.

          Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

          by hestal on Sat Nov 10, 2012 at 05:26:27 AM PST

          [ Parent ]

          •  My economics professor client. . . (0+ / 0-)

            . . . told me that people who grasp mathematics and understand human behavior are generally incapable of making sense of economics.  That was 6 years ago.  Apparently, the complexity and polarization of financial systems have increased so severely, confusion is even more prevalent these days.  

            Hestal, I'm still hoping you'll suggest some reading for me:

            Perhaps you could suggest 2 books: one that explains MMT to an intelligent layperson, and another by Krugman that can help me see his confusion (which I've never recognized)?
            •  "Seven Deadl Innocent Frauds" by Mosler is a good (2+ / 0-)
              Recommended by:
              arendt, psyched

              book to get started.

            •  And he was wrong. Our Constitution was (1+ / 0-)
              Recommended by:
              psyched

              designed to deal with human behavior. James Madison said in Federalist 10 that the principal design goal of the Constitution was to control the effects of faction. He went to the trouble to define faction. He was precise. He did not want his readers to misunderstand. Madison said:

              By a faction, I understand a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community.
              Factions, by Madison’s definition, are always bad things. Factions are made up of human beings, and they always work against the common good. Because any social organization reflects the nature of the humans who control it, the men who form factions are therefore naturally inclined to work against the common good. There is a more benign definition of faction that is in common use today. Many people seem to think of faction as simply a quarrelsome subset of a political party, sometimes irritating, other times worrisome, but rarely dangerous. That form of faction is like a wart on the back of one’s hand. But Madison’s form of faction is a cancerous tumor growing in one’s body that, if left unchecked, will kill its host.

              But not all human beings are inclined to form factions, not all humans are inclined to work against the common good. Other humans naturally work for the common good. Economists, when they talk of human nature, never take this fact into account. There are two varieties of humans: Varietas Tyrannica and Varietas Democratica. As their names imply they will take different paths in response to the same stimuli. Economics has no room in its theology for such differences in behavior. Because of this fact, economic theory is built on sand.

              Call your professor and ask him what has happened. Our economic situation is in a mess. Is it due to a lack of understanding of mathematics, or a lack of understanding of human nature? Something sure as hell happened.

              Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

              by hestal on Sat Nov 10, 2012 at 06:17:58 AM PST

              [ Parent ]

              •  Reminds me. . . (0+ / 0-)
                There are two varieties of humans
                . . . of an old adage among psychologists.  There are two types of people in this world: those who divide people up into two groups, and those who don't.  
                •  Sure, make a joke, but there are many others (1+ / 0-)
                  Recommended by:
                  psyched

                  who agree with my idea. For example, Jimmy Carter defines Varietas Tyrannica in his book Our Endangered Values, John Quincy Adams described them in 1820 after a meeting with James Monroe and John C. Calhoun in which slavery was discussed at length, I. W. Charny, a psychologist, wrote a book about them. He describes them as people with a democratic mind and people with a fascist mind. Lord Acton famously talked about V. Tyrannica. John W. Dean wrote about tyranni in Conservatives Without Conscience, and Martha Stout a psychologist who teaches at Harvard wrote about them in her book, The Sociopath Next Door. The American Psychiatric Association describes them as having Antisocial Personality Disorder or Narcissistic Personality Disorder. Charles Darwin wrote that varieties of species are natural and necessary.

                  If Charles Darwin were still alive, I think that he would say that Edward O. Wilson is one of those “naturalists having sound judgment and wide experience,” that we should listen to. Wilson has written many important books on various topics concerning evolution. His latest, The Social Conquest of Earth, may well be his most important. In it, he explains how human evolution has resulted in a fundamental conflict between behaviors that favor the success of the individual human and behaviors that favor the success of groups of humans. He says that these two conflicting behaviors have a genetic basis:

                  Alleles (the various forms of each gene) that favor survival and reproduction of individual group members at the expense of others are always in conflict with alleles of the same and alleles of other genes favoring altruism and cohesion in determining the survival and reproduction of individuals. Selfishness, cowardice, and unethical competition further the interest of individually selected alleles, while diminishing the proportion of altruistic, group-selected alleles. These destructive propensities are opposed by alleles predisposing individuals toward heroic and altruistic behavior on behalf of members of the same group. Group-selected traits typically take the fiercest degree of resolve during conflicts between rival groups.
                  Wilson’s conclusion is that this conflict, this struggle between two kinds of humans, has only one outcome:  
                  An unavoidable and perpetual war exists between honor, virtue, and duty, the products of group selection, on one side, and selfishness, cowardice, and hypocrisy, the products of individual selection, on the other side.

                  … In summary, the human condition is an endemic turmoil rooted in the evolution processes that created us. The worst in our nature coexists with the best, and so it will ever be. To scrub it out, if such were possible, would make us less than human.

                  I can think of no better description of our present predicament. The Darwinian struggle has long been with us. The best we can do is to do our best. We must control the adverse effects of tyranni, we must control the adverse effects of factions—we must work for the common good.

                  So, is our current economic mess a result of the failure of economists to understand mathematics or the failure of economists to understand human nature?

                  Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

                  by hestal on Sat Nov 10, 2012 at 08:19:18 AM PST

                  [ Parent ]

                  •  See also (1+ / 0-)
                    Recommended by:
                    psyched

                    Political Ponerology

                    Like a color blind man incapable of distinguishing red from green, a small minority of the human population cannot experience or fully comprehend the normal range of human emotions. And like those color blind who may conceal their condition by using the correct words while not understanding their meaning (e.g., the top traffic light is “red”, the bottom is “green”) - so does this minority conceal their condition by playacting an emotion's exterior signs (facial expressions, exclamations, body language). However, they do not actually experience the emotion in question. Their deception is revealed in the laboratory, where they respond to words like DEATH, CANCER, DISEASE, as if they were DAY, CREAM, or PAPER. They lack the ability to comprehend the emotional “punch” that certain words contain. They use others’ emotional reactions as cues, and they adjust their behavior to portray the correct ‘emotional’ behavior. (Hare, 129-30)

                    These individuals are known as psychopaths. Not only can they not feel the pain of others, they often seem to deliberately cause others pain. Lobaczewski refers to this disorder as an “essential psychopathy” to distinguish them from others with deficits in their genetic/instinctual endowment, essential psychopathy being the most severe and disturbing.

                    Many so-called “antisocial individuals” acquire similar characteristics in their life-time, whether caused by brain damage to certain areas of the brain, or functionally, because of close contact with and influence by such individuals. Lobaczewski terms such individuals characteropaths. The vast majority of both these groups cannot change. The acts that we call evil (especially on a macrosocial level) can be traced back to this deviant minority of human beings and the effects of their actions on their family, friends, and society.

            •  About books. I am still looking for a good one. (1+ / 0-)
              Recommended by:
              psyched

              I have tried a couple and I have read various blogs, but there is a real lack of coherence.

              Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

              by hestal on Sat Nov 10, 2012 at 06:19:36 AM PST

              [ Parent ]

            •  Hey Doc, I'd approach the Krugman vs. MMT this (4+ / 0-)
              Recommended by:
              arendt, hestal, psyched, jellyyork

              way:  They agree about the really important basics from a non-economist's point of view -- like me.

              Krugman agrees that we're not on the gold standard.

              He agrees that every dollar is both a public liability and a private asset.

              He agrees that the US is  a currency sovereign of a fiat currency with a floating exchange rate.

              What made the MMT vs. Krugman debate even more confusing is that he began arguing with MMT, then argued with Steve Keen, the king of private bank credit creation.

              So you might want to google Steve Keen as well.  In simple terms, he studies the ways in which private banks create money and it's impact on the economy.

              The problem with classical economics (which Krugman fits into) is that it ignores things like money and banking.  Really.  Weird.  But there you have it.

              Steve has given many interviews and video presentations, he's a pretty clear speaker.

              Be warned:  You'll at first think MMT is weird cuz you've been conditioned to think within a gold standard paradigm, and being a psychologist, you know how difficult it is for the brain to accept a paradigm shift.

              However, once those new connections are formed, then MMT makes obviouse sense -- at least in it's fundamentals.

              Like --  The US can never go broke.  Seems odd considering  all the talking heads exploding over our debt crises.  But then.....  just like you could never go broke if you had a dollar making machine in your kitchen, neither can the US.

              •  THANKS! (1+ / 0-)
                Recommended by:
                katiec
              •  Krugman's a deficit dove (3+ / 0-)
                Recommended by:
                Zwackus, katiec, psyched

                He believes in long-term deficit reduction. He just doesn't want to start now.

                The MMT deficit owls believe that fiscal policy needs to be measured by its concrete impacts on real things like full employment, price stability, poverty, crime rates, family disintegration, innovation, inequality, community development, and other aspects of public purpose, and this means that long-term plans aimed at reducing the deficit or creating surpluses are fiscally irresponsible because they aren't aimed at anything that matters in itself. They're just improper criteria for evaluating fiscal performance in light of the fact that governments with sovereign fiat currencies have no limits when it comes to money creation.

                •  Yes, that's it exactly (2+ / 0-)
                  Recommended by:
                  katiec, psyched

                  Taxation is not a source of funds, it's a tool to manage economic behavior and destroy dangerous accumulations of wealth.

                  A budget deficit is not a problem, it's a tool to create macroeconomic demand.

                  A budget surplus is not a goal, but a tool to deflate an over-heating economy.

                  The national debt is not a problem, it's a tool to regulate the capital markets.

                  Inflation is not a problem, it's a tool, though one rarely needed.

                  Deflation, however, is pretty much always a problem.

                  `Under my command, every mission is a suicide mission.`

                  by Zwackus on Sat Nov 10, 2012 at 09:57:06 PM PST

                  [ Parent ]

          •  First we need get the facts straight, then build (3+ / 0-)
            Recommended by:
            hestal, psyched, jellyyork

            theory.

            Because most people still talk as though we're on the gold standard, it's most imperative to get the simple fact that this changed in 1972 out there.

        •  Hey DocChap, I don't know how to provide links, (5+ / 0-)
          Recommended by:
          hestal, arendt, grasshopper, psyched, jellyyork

          but....

          If you go to a blogspot called "New Economic Perspectives" you'll find a wealth of info. on MMT, including a Primer written by Randall Wray.

          New Economic Perspectives is run by Stephanie Kelton.  She's great, easy to understand.  You can google her and find presentations she's given.

          There's also a group here called "Money and Public Purpose" which has lots of good diaries.

          Finally, MMT is 2 things:  a description of how our monetary system works, including how national accounting works, and then it's  prescriptive as well.  

          Krugman actually agrees with a lot of MMT.  It's when you start to get into the particulars that there's disagreement.  One of the disagreements that Krugman and MMT have had is how private banks work.  MMT says that banks make loans first, then find reserves.  Krugman wants to believe that banks lend out their reserves -- though the debate seemed to end with Krugman concedeing that this is probably no longer the actual case.  But then he just shut down the debate.

          Anyway -- Alan Greenspan, Bernanke and Geitner are all on record as stating that the US cannot run out of dollars.  And this simple little fact is where people thinking about this issue needs to begin, cuz the deficit terrorists want us to believe that money is in short supply.  

          Whereas the reality for the US is that it can't run out of dollars anymore than-- in Geitner's words -- a "bowling alley can run out of points".  Cuz dollars are no longer a thing (a commodity like when we were under the gold standard), but rather are now merely a unit of account, like inches, or points at a bowling alley.

          •  Well said, katiec. nt (2+ / 0-)
            Recommended by:
            katiec, psyched

            Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

            by hestal on Sat Nov 10, 2012 at 05:38:09 AM PST

            [ Parent ]

          •  THANKS! I'll check these out! n/t (1+ / 0-)
            Recommended by:
            psyched
          •  Your opinion, please. . . (0+ / 0-)

            on this:

            http://www.sltrib.com/...

            It makes a great deal of sense to me, and I've been linking it in comments here and forwarding it to friends and family for the last 24 hours.  

            Isn't Krugman. . . uh, right about the "fiscal cliff" (referred to elsewhere here as Boehner's Bluff and the Repub Ramp)?

            •  I agree, so does MMT :) (1+ / 0-)
              Recommended by:
              psyched

              Jamie Galbraith has a great article up at Salon -- he's not an MMTer, but accepts MMT description of our monetary and national accounting reality.

              There was a diary about his article yesterday that was very good.

            •  It makes sense to me. (0+ / 0-)

              But he is talking about political strategy, not economics, right?

              Might and Right are always fighting, in our youth it seems exciting. Right is always nearly winning, Might can hardly keep from grinning. -- Clarence Day

              by hestal on Sat Nov 10, 2012 at 06:23:58 AM PST

              [ Parent ]

            •  Yes, he is (2+ / 0-)
              Recommended by:
              katiec, psyched

              But MMT people have published a huge number of posts on the phoney fiscal cliff crisis for some time now. You can find some of them on the Money and Public Purpose blog I've linked to above. We've been warning about it for months and months.

              Krugman's latest post approaches the MMT line of reasoning very closely, in certain respects. But he wouldn't agree with us about what to do in the longer run. What that means is that he gives away too much to Peter Peterson and the other fix the debt people, by being unable to deny that they have a legitimate concern about the debt-to-GDP ratio. We just say that doesn't matter a damn. Past deficits and accumulated debts have nothing to do with current fiscal capacity if you have a sovereign fiat currency like the US.

              So, in any year, you go ahead with fiscal policy that will provide the best outcomes for full employment, price stability, and other valued outcomes.

          •  DailyKos Money and Public Purpose (2+ / 0-)
            Recommended by:
            katiec, psyched

            blog, is here. We've been blogging for some time now. And we re-published this very good post.

        •  Some good MMT (1+ / 0-)
          Recommended by:
          psyched

          links are included below by others. But the exchange with Dr. K has happened and occasionally still happens on line. Here's a link that reviews some of the previous controversies from an MMT point of view.

          You won't find it awfully polite or respectful. I'm respectful of good arguments; not previous achievements or reputation. That is, I think it's about what people say; not who they are, and that arguments from authority are a logical fallacy.

          Besides if a person's reputation is relevant to an argument, then that should be reflected in their argument. If it's not, then who they are hasn't helped them make their case anyway.

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